3 Weird Year-End Tax Tips for Canadians

Coach Roel Sarmago Shares Little-Known Tax Opportunities Canadians Can Use Before December 31.

2016 has been a year of surprises. No one outside the U.K. thought that country would vote to leave the Eurozone. Yet it did. No one outside the U.S. thought Donald Trump would get elected. Yet he did. Everyone on Bay Street thought a Donald Trump victory would crash the markets. So far, the markets are at all-time highs. It seems opposites were the norm in 2016.

In the same vein, Coach Roel offers three weird “opposite” tax-tips for Canadians that you won’t hear from your banker. Before the year is through, invite Coach Roel to share why you may want to consider:

Most banks and advisors will suggest that you make a $5,500 contribution to your investments held within a TFSA before December 31.. This is not bad advice, but the unused TFSA contribution room carries over to the next year anyways and the contribution isn’t tax deductible. In reality, there is really no rush to contribute to your TFSA before December 31st per se.
A cool idea instead is to withdraw from your TFSA (if you have money there and if you need it for whatever) before December 31st. Keep in mind that whenever you withdraw or de-register any money from your TFSA you re-gain that contribution room the following calendar year, i.e. January 1st.

Thus, if you anticipate needing a bit of extra money in the short term to pay off those annoying holiday credit card bills come January, then get it from your TFSA before December 31st, pay off those pesky bills and then put the money back in your TFSA in February, for example, after your first few pay cheques. LOL!

Withdraw From Your RRSP

A Registered Retirement Savings Plan (RRSP) is the biggest tax break available to most Canadians. If you know for a fact that you will be in a significantly higher tax bracket next year, then it might be a good idea to de-register (i.e. withdraw) some of your RRSPs before December 31st and then re-contribute it after January 1st. Just make sure to claim the latter contribution on your 2016 income taxes, which would be during tax-filing season early in the New Year.

For example, this would work if you were on maternity leave for most or all of 2016 with relatively little taxable income and you’re going back to full-time work (and earning full-time income again) for most or all of 2017.

Capital Acquisitions for Your Business

Don’t have a business? You still have time! Start one before the ball drops at midnight on December 31st and you’re good to go.

If you are planning to buy a new computer, printer, software, delivery truck or other equipment that is at least $500 or more for your business, then be sure to buy it before December 31st, so you can write off a whole year’s worth of usage, yet it’s only going to be a few days old. This legitimate tax deduction is called depreciation. Look it up. Otherwise, your accountant will know what I mean.

Business deductions also work with gift cards that you plan to use as customer appreciation gifts or referral thank you gifts. Be sure to buy them in increments of $50, since that is considered a safe and acceptable thank you gift amount. However, you can buy several $50 gift cards and write the aggregate amount against your 2016 income taxes and get the tax benefit sooner.

So, there you have 3 contrarian year-end tax tips that your Canadian banker probably never told you about (and probably never will). Pass the egg nog, please.